Key Takeaways WDC shipped 204 exabytes this quarter, up 23% YoY, driven by AI and cloud storage demand.WDC raised its quarterly dividend 25% to 12.5 cents, returning $785M to shareholders since FY25.WDC trades at 19.45X forward earnings, far below PSTG's 82.84X, highlighting valuation appeal.Both Western Digital Corporation (WDC) and Pure Storage, Inc.(PSTG) operate in the data-storage & enterprise storage hardware/software industry. Each caters to demands for data storage, management and solutions, though ...

Core Viewpoint - Super Micro Computer (SMCI) shares have declined by 18.4% over the past six months, significantly underperforming the Zacks Computer-Storage Devices industry's return of 77.5, raising questions about whether investors should buy, hold, or sell the stock [1][10]. Group 1: Operational Challenges - SMCI is facing significant operational challenges despite strong demand driven by AI, with gross margins expected to drop sharply due to the ramp-up of mega-scale GB300 Blackwell clusters [4]. - The company is experiencing margin pressure due to customer concentration and the need to retain larger customers, leading to higher receivables and a negative free cash flow of $950 million for the first quarter of fiscal 2026 [5]. - SMCI's working capital issues are exacerbated by the operational scale-up required to meet unprecedented AI rack demand, with plans to roll out 6,000 racks per month, including 3,000 liquid-cooled racks, and expand facilities in multiple regions [6]. Group 2: Financial Metrics - SMCI's first-quarter fiscal 2026 closing inventory was $5.7 billion, an increase from $4.7 billion in the previous quarter, causing the cash conversion cycle to spike from 96 days to 123 days [7]. - The company projects a sequential decline of 300 basis points in gross margin for the second quarter of fiscal 2026, with the Zacks Consensus Estimate for earnings at 49 cents per share, indicating a year-over-year decline of 19.7% [12]. Group 3: Competitive Landscape - Rising competition from major players in the storage and server space, such as Pure Storage, Dell Technologies, and Hewlett Packard Enterprise, poses a significant concern for SMCI, impacting pricing and execution [8][11]. - Pure Storage offers modern storage solutions that enhance performance and cloud integration, while Dell and HPE provide a range of server services, intensifying price competition in the market [9][11]. Group 4: Market Sentiment - SMCI shares are currently trading below both the 200-day and 50-day moving averages, indicating a bearish trend in the stock [15]. - Despite the long-term AI opportunities, the company's near-term challenges, including margin pressure and heavy working-capital needs, make it highly volatile, leading to a Zacks Rank 5 (Strong Sell) [16].

Core Insights - Pure Storage, Inc. (PSTG) has demonstrated strong stock performance, gaining 68.6% over the past three months, significantly outperforming the Zacks Computer-Storage Devices industry, the Zacks Computer and Technology sector, and the S&P 500, which grew by 35.4%, 13.2%, and 7.6% respectively [1][8]. Performance Drivers - The stock rally is attributed to increasing investor confidence driven by AI-related demand, a subscription-based growth model, and the rising need for flash-based storage solutions [4][8]. - Strong demand from large enterprises and ongoing momentum in products like FlashBlade, particularly FlashBlade//E, along with the adoption of core software and services offerings, are key growth catalysts [5][10]. - Subscription services revenues reached $414.7 million, representing a 14.8% increase, with annual recurring revenues nearing $1.8 billion, up 18% year-over-year [5][11]. Product and Service Innovations - The introduction of the Enterprise Data Cloud (EDC) and enhancements to the Pure Storage Platform are expected to boost revenue growth by enabling businesses to leverage AI for improved workflow efficiency [6][7]. - New storage products, including FlashArray//X R5 and FlashArray//C R5, have been launched, with FlashArray//XL 190 expected to be available in the fourth quarter of fiscal 2026 [9][10]. Strategic Partnerships and Market Position - A strategic partnership with Meta Platforms has progressed to the first volume deployment, with revenues recognized in the fiscal second quarter [11]. - Management anticipates deploying 1-2 exabytes of DirectFlash technology by fiscal 2026, indicating strong confidence in future performance [11]. Financial Outlook - The company expects revenues between $3.6 billion and $3.63 billion for fiscal 2026, reflecting a 14% year-over-year growth at the midpoint, which is an increase from the previously guided 11% growth [11]. - Pure Storage reported cash and cash equivalents of $1.5 billion and free cash flow of $150.1 million in the fiscal second quarter [13]. Shareholder Returns - The company returned $42 million to shareholders through share repurchases in the fiscal second quarter, with $109 million remaining under its current authorization plan [14]. Competitive Landscape - Despite strong performance, Pure Storage faces challenges from economic pressures and intensifying competition in the flash-based storage market [15][16]. - The stock is currently trading at a premium with a forward 12-month Price/Earnings ratio of 39.34X compared to the industry average of 22.39X [18].

Core Insights - Pure Storage reported strong Q2 fiscal 2026 results, with non-GAAP EPS of 43 cents, exceeding estimates by 10.3% and slightly down from 44 cents in the prior year [2] - Quarterly revenues reached $861 million, a 13% increase year-over-year, surpassing estimates by 1.8% and management's guidance of $845 million [3] - The company has provided a revenue guidance range of $3.6 billion to $3.63 billion for fiscal 2026, indicating a 14% year-over-year growth at the midpoint, which is an increase from the previous guidance of 11% [4] Financial Performance - Product revenues contributed 51.8% to total revenues, amounting to $446.3 million, a 10.6% increase year-over-year, while subscription services revenues rose 14.8% to $414.7 million [6] - Subscription annual recurring revenues (ARR) reached nearly $1.8 billion, up 18% year-over-year [6] - Non-GAAP gross margin was 72.1%, slightly down from 72.8% in the prior year, with product gross margin at 68% and subscription services gross margin at 76.5% [8] Cash Flow and Shareholder Returns - Cash flow from operations was $212.2 million, down from $226.6 million in the prior year, while free cash flow decreased to $150.1 million from $166.6 million [11] - The company returned $42 million to shareholders through share repurchases, with $109 million remaining under its current authorization plan [11] Future Guidance - For Q3, Pure Storage expects revenues between $950 million and $960 million, indicating a 15% increase year-over-year at the midpoint [13] - Non-GAAP operating income is projected to be between $185 million and $195 million, reflecting around 14% year-over-year growth at the midpoint [13] Market Sentiment - There has been a positive trend in estimates revisions, with a consensus estimate shift of 23.75% in the past month [14] - Pure Storage holds a Zacks Rank 3 (Hold), suggesting an expectation of in-line returns in the coming months [16]

Core Insights - Pure Storage has announced innovations in its platform to enhance cyber resilience, enabling organizations to proactively detect threats, protect against attacks, and recover effectively [1][4] - The traditional multi-vendor approach to cyber defense is inadequate, as it leaves organizations vulnerable by missing critical threat signals within their data [2] - The introduction of the Enterprise Data Cloud (EDC) allows for centralized management of data across various environments, facilitating intelligent data governance [3] Cyber Resilience Enhancements - Pure Storage's platform now includes built-in threat detection capabilities, allowing for rapid response and recovery from attacks [2][4] - The company is developing an extended threat detection network to share threat signals with partners, integrating these capabilities into existing security tools [4] - New partnerships with CrowdStrike and Superna enhance security measures, providing real-time visibility and automated responses to threats [5][12] Recovery Solutions - Pure Storage offers proactive adaptive recovery solutions to ensure faster data recovery during attacks, emphasizing the importance of trusted backup data [6][12] - The introduction of Pure Protect Recovery Zones allows for isolated recovery environments, enabling businesses to test and validate applications without disrupting production [12] Market Position and Strategy - Pure Storage positions itself as a leader in the data storage industry, focusing on delivering advanced technology and services that simplify data management and enhance security [8][14] - The company's Evergreen architecture ensures continuous improvement and scalability, aligning with the evolving needs of businesses [8]

Core Insights - Super Micro Computer (SMCI) stock has increased by 6.4% over the past month, which is lower than the Zacks Computer-Storage Devices industry's return of 23.6% [1][5] - Despite the stock's rise, it is trading at a forward P/E ratio of 20.45X, which is below the industry average of 21.76X, raising questions about whether to hold or exercise caution [4] Financial Performance - In fiscal 2025, SMCI reported a 47% year-over-year revenue growth, reaching $22 billion, with expectations to increase revenues to $33 billion in fiscal 2026 [5][7] - The company's next-generation air-cooled and liquid-cooled GPU and AI platforms contributed over 70% to its top line in Q4 of fiscal 2025 [8] Market Position and Growth Drivers - SMCI is becoming a significant player in the AI server market, leveraging the latest NVIDIA and AMD platforms to drive growth [6][7] - The company's direct liquid cooling technology is in high demand, particularly among hyperscalers and AI data centers, due to its efficiency in reducing heat and electricity consumption by 40% [9] Competitive Landscape - SMCI faces rising competition from major players like Pure Storage, Dell Technologies, and Hewlett Packard Enterprise, which could impact its market share [10][11] - The company is experiencing challenges such as delayed purchasing decisions from customers evaluating next-generation AI platforms and margin contraction due to price competition [13][14] Earnings Estimates - The Zacks Consensus Estimate for SMCI's earnings per share (EPS) shows a decline of 37% and 5% for the first and second quarters of fiscal 2026, respectively [14][15] - Year-over-year growth estimates for fiscal 2026 indicate a 23.3% increase, followed by a 29.2% increase in fiscal 2027 [15] Conclusion - Given the mixed challenges and long-term growth potential in server, storage, and cooling products, the recommendation is to hold SMCI stock at this time [16]

Company Overview - Pure Storage (PSTG) is valued at $28.4 billion and specializes in software-defined all-flash solutions that are fast and cloud-capable for customers [1] - The company is a pioneer in a data storage business model that focuses on evolving with clients to simplify costs, data management, and complexity [1] Product Offerings - Primary offerings include FlashArray and FlashBlade products, along with Purity Operating Environment (Purity OE) software, Pure1 cloud-based software, and FlashStack, a joint solution with Cisco [2] Stock Performance - PSTG stock gained 46.04% since the Trend Seeker buy signal on August 12 [3] - The stock hit a new all-time high of $87.96 on September 16 and is up more than 75% over the past year [6][5] - In the last month, the stock made 10 new highs and gained 50.01% [8] Technical Indicators - Pure Storage has a Weighted Alpha of +69.52 and a 100% "Buy" opinion from Barchart [7] - The Relative Strength Index (RSI) is at 83.32%, indicating strong momentum [8] - The stock is trading above its 20-, 50-, and 100-day moving averages, with a technical support level around $83.85 [7][8]

Core Insights - Pure Storage, Inc's (PSTG) shares have gained 37.1% in the past month and 29.4% since strong quarterly results were announced on August 27 [1][8] - The stock has outperformed the Computer-Storage Devices industry, the Zacks Computer and Technology sector, and the S&P 500 composite, which grew by 12.7%, 2.9%, and 3.1% respectively [4] Price Performance - Closing at $78.73, PSTG is near its 52-week high of $80.68 reached on August 28, 2025 [4] Business Growth Drivers - Strong demand from large enterprises and ongoing momentum in FlashBlade, particularly FlashBlade//E, are key growth drivers [5] - Subscription services revenues rose 14.8% to $414.7 million, with annual recurring revenues (ARR) reaching nearly $1.8 billion, up 18% year-over-year [6][8] - The introduction of new storage systems in the Flash portfolio aims to address high-performance and scalable workloads [7] - The launch of the Enterprise Data Cloud (EDC) enhances data and storage management capabilities [8] Financial Health - Pure Storage exited the fiscal second quarter with cash and cash equivalents of $1.5 billion, and cash flow from operations was $212.2 million [9] - The company returned $42 million to shareholders through share repurchases [10] Future Outlook - For fiscal 2026, PSTG expects revenues between $3.6 billion and $3.63 billion, indicating a 14% year-over-year growth at the midpoint [11] - Analysts have revised earnings estimates upward, reflecting bullish sentiment [12] Competitive Landscape - Despite strong performance, Pure Storage faces competition in the flash-based storage market and potential delays in enterprise cloud migrations due to macroeconomic uncertainties [13][14] Valuation Concerns - PSTG is trading at a forward Price/Earnings ratio of 36.41X, significantly higher than the industry average of 19.47X, raising concerns about its valuation [15] Investment Recommendations - Current sentiment suggests that new investors should wait for a better entry point, while existing investors are advised to retain their holdings [16][17]

Core Insights - Pure Storage (PSTG) reported second-quarter fiscal 2026 non-GAAP earnings per share (EPS) of 43 cents, exceeding the Zacks Consensus Estimate by 10.3% and slightly down from 44 cents in the prior-year quarter [1][8] - Quarterly revenues increased by 13% year-over-year to $861 million, surpassing both the Zacks Consensus Estimate by 1.8% and management's guidance of $845 million, driven by strong demand from large enterprises and growth in FlashBlade and core software offerings [2][8] Financial Performance - PSTG's product revenues, which accounted for 51.8% of total revenues, reached $446.3 million, reflecting a 10.6% year-over-year increase, while subscription services revenues (48.2%) rose by 14.8% to $414.7 million [5] - Subscription annual recurring revenues (ARR) were nearly $1.8 billion, marking an 18% increase year-over-year [6] - Non-GAAP operating income is forecasted between $605 million and $625 million, indicating about 10% year-over-year growth at the midpoint, which is an improvement from prior guidance [3][4] Guidance and Market Response - For fiscal 2026, PSTG expects revenues in the range of $3.6 billion to $3.63 billion, suggesting a 14% year-over-year growth at the midpoint, which is an increase from the previously guided 11% growth [3][4] - Following the strong quarterly performance and positive guidance, PSTG shares jumped 15% in pre-market trading, with a 21% increase over the past year compared to the industry growth of 7.1% [4] Margin and Cash Flow - The non-GAAP gross margin was reported at 72.1%, slightly down from 72.8% in the prior-year quarter, while the non-GAAP operating margin decreased to 15.1% from 18.1% year-over-year [10][11] - Cash flow from operations for the quarter was $212.2 million, down from $226.6 million in the prior-year quarter, with free cash flow at $150.1 million compared to $166.6 million [12] Shareholder Returns and Obligations - In the fiscal second quarter, the company returned $42 million to shareholders through share repurchases, with $109 million remaining under its current authorization plan [13] - Remaining performance obligations totaled $2.8 billion, reflecting a 22% year-over-year increase [13] Future Outlook - For fiscal Q3, PSTG anticipates revenues in the range of $950 million to $960 million, indicating a 15% increase at the midpoint from the previous year, with non-GAAP operating income expected to be between $185 million and $195 million [14]

Financial Data and Key Metrics Changes - Revenue for Q2 FY 2026 was $861 million, representing a 13% year-over-year growth, while operating profit was $130 million with an operating margin of 15.1% [22][28] - Subscription services revenue reached $415 million, up 15% year-over-year, accounting for 48% of total revenue [26] - Total remaining performance obligations (RPO) grew 22% to $2.8 billion, reflecting robust renewals and new commitments [26] - Total gross margin remained strong at 72.1%, with subscription services gross margin at 76.5% [27] Business Line Data and Key Metrics Changes - Strong performance was noted across the entire portfolio, particularly in FlashBlade and core software and services offerings like Evergreen One, Cloud Block Store, and Portworx [22][24] - Total contract value (TCV) sales for Storage as a Service offerings grew 24% year-over-year to $125 million [24] - The FlashBlade E family showed strength, contributing to overall product gross margin improvement [88] Market Data and Key Metrics Changes - U.S. revenue was $577 million, growing 7%, while international revenue was $284 million, growing 26% year-over-year [27] - More than 300 new customers were added, maintaining a 62% penetration rate in the Fortune 500 [27] Company Strategy and Development Direction - The company is focused on the enterprise data cloud architecture, which is transforming how organizations manage data, emphasizing the shift from traditional siloed storage to a software-defined model [9][11] - Continued investment in partnerships with hyperscalers, including Meta, to enhance direct flash technology and expand market presence [25][17] - The introduction of a guidance range for financial metrics aims to align with industry practices and provide flexibility for growth opportunities [30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to extend industry leadership despite a variable macro environment, citing strong execution and planning [20] - Positive momentum is expected in the second half of the fiscal year, driven by strong demand signals and an increasing pipeline of large deals [110] - The company anticipates revenue for FY 2026 to be in the range of $3.6 billion to $3.63 billion, representing a 14% year-over-year growth at the midpoint [31] Other Important Information - The company reported a strong free cash flow performance of $150 million, with a free cash flow margin of 17.4% [29] - A new partnership with Nutanix is expected to enhance customer interest and scalability in virtualization environments [58] Q&A Session Summary Question: What is driving the acceleration of growth in the back half of the fiscal year? - Management noted broad-based strength in product lines and improved visibility into the pipeline, contributing to confidence in growth forecasts [36] Question: How has the relationship with Meta evolved? - The relationship is progressing as expected, with deployments on track and revenue recognition beginning [42] Question: What factors contributed to the sequential gross margin improvement? - Management attributed the improvement to revenue mix, product mix, and pricing discipline, with Meta's contribution being less material than anticipated [48] Question: How is the engagement with other hyperscalers progressing? - Early-stage engagements are ongoing, with technology assessments and proofs of concept underway, but still in the initial phases [64] Question: What are the long-term expectations for Meta's contribution? - Management expects to achieve one to two exabytes of deployment this fiscal year, with potential for double-digit contributions in the next fiscal year [70] Question: How should the split between product versus subscriptions be viewed? - Management indicated that both product and subscription revenues are expected to grow, with subscription gross margins being higher than product gross margins [98]